The Spot Exchange Rate for the British Pound Is 0

question 47

Multiple Choice

The spot exchange rate for the British pound is 0.6 pounds/dollar. The one-year interest rate in the United States is 5% and the one-year interest rate in Britain is 6%. Based on these rates, what one-year forward exchange rate is consistent with the absence of arbitrage?

• A) 0.606 pounds/dollar
• B) 0.612 pounds/dollar
• C) 0.617 pounds/dollar
• D) 0.624 pounds/dollar

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Definitions:

Anxiety

A mental health disorder characterized by feelings of worry, anxiety, or fear that are strong enough to interfere with one's daily activities.

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The act of keeping steady visual connection with another person's eyes during communication, which is often associated with confidence and engagement.

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Verbalizing Implied

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